Clause 12 - Notice of default sums
Consumer Credit Bill
2:15 pm
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
Again, the clause goes right to the heart of the lack of clarity in the Bill. So many questions arise from it that we need to spend a little while addressing them. Would information on default sums—for example, when they would be imposed and how they would be calculated—have to be given when a lending agreement was made? That should be the case because it is too late to tell people the consequences when they are already incurring the charges.
Who will judge if a default sum is reasonable? Will it be the courts or the Office of Fair Trading? Why has more guidance not been given on what would be considered to be reasonable? Would the courts or the OFT have the power to reduce a default sum or to strike it out completely if it was unreasonable or if the terms whereby it could be imposed were not clear to a borrower when setting up the agreement? My impression is that clause 15 covers that, but I would be grateful for the Minister's absolute assurance that it does. There is a danger that unscrupulous firms might seek to use default sums to make up for restrictions imposed elsewhere in the Bill. It is not clear whether they would be adequately prevented from doing so, so we need further assurances from the Minister that consumers would be protected.
We also need to know whether the default fee could be interpreted to mean that the whole outstanding part of the debt would immediately be liable to be paid, which could have extremely serious consequences for a borrower. What right of appeal would there be and how could that be considered in the time scale of 28 days before the fee becomes payable? How would the measure affect bank accounts given that if someone goes into an overdraft, a bank would have to send written notice and then wait 28 days before it could impose an overdraft fee. I am not saying that that is unacceptable—many of us have concerns about overdraft charges—but we need to understand the implications of the provisions fully.
Returning to a concern that I raised earlier, how would the notices be delivered? Would they be posted or e-mailed? Would they have to be sent by registered post and signed for? How could we be certain that the notice is received by the right person? As the Minister knows, fundamental to the Bill is the fact that it shifts the responsibility and liability from the borrower to the lender. The lender must prove that they have acted fairly. Therefore, they would have to be certain that they got the information through to the right person and that that person understood it. That again raises issues of providing the information in different languages, for people whose first language is not English, in Braille for blind people, and in an understandable way for those with learning difficulties. Those issues are not covered by the Bill. Without those assurances and explanations, the clause is inadequate.